New RAND Study Finds Telehealth Unlikely to Decrease Health Spending

The RAND Corporation this month released a study on the costs of direct-to-consumer telehealth services. The study found that direct-to-consumer telehealth may actually drive up medical spending rather than reduce costs, due to the increased convenience.

In direct-to-consumer telehealth, patients have access to physicians via telephone or video. This is thought to reduce costs, as in-person medical visits are replaced with less expensive virtual visits. However, with the increased convenience of these virtual visits, people may be requesting more medical services than ever before–increasing, rather than decreasing, costs.

The study looked at commercial claims data from more than 300,000 patients who had insurance coverage for direct-to-consumer telemedicine, analyzing patterns of health care use and spending across 2011-2013. They found that just 12 percent of telemedicine visits replaced visits to doctors’ offices or emergency rooms that would have happened anyway, with 88 percent of telemedicine visits being entirely new use of medical services.

While costs of telehealth services were about 50 percent lower than a physical office visit and 95 percent lower than an ER visit, the savings from substitution are outweighed by the 88 percent of new services visits. The study estimates that net annual spending increased by $45 per telehealth user.

“Like some other new patient care models that promise to cut costs and reduce the hassle of receiving medical care, it appears that in some cases, direct-to-consumer telehealth may increase spending rather than trim costs,” said J. Scott Ashwood, lead author of the study and associate policy researcher at RAND, a nonprofit global policy think tank.

“Given that direct-to-consumer telehealth is even more convenient than traveling to retail clinics, it may not be surprising that an even greater share of telehealth services represent new medical use,” said Lori Uscher-Pines, co-author of the new report and policy researcher at RAND. “The lower the threshold for seeking care […] the greater the use of medical services.”

The study suggests that new strategies may be needed to curb the use of telehealth for new medical services, such as higher co-pays or targeted marketing.